UPDATE 1-Zacky Farms files for bankruptcy, blames feed costs

CHICAGO, Oct 9 (Reuters) - California poultry processorZacky Farms LLC filed for bankruptcy protection on Tuesday whileoutlining plans to sell the company which has been crippled byhigh feed costs following the worst drought in half a century.

The company - whose roots in the poultry industry date backto the 1920s - said it employs about 1,500 people in Fresno, LosAngeles, Tulare, Kings and San Joaquin counties.

It listed between $50 million to $100 million in assets,with debts in the same range, according to court filings.

The documents, filed on Monday in U.S. Bankruptcy Court inthe Eastern District of California in Sacramento, showed that the company's largest unsecuredcreditors are Western Milling, a feed company whom Zacky Farmsowes about $6.6 million, and Foster Farms LLC, the Livingston,California-based poultry producer, which is owed about $1.2million.

Zacky Farms, a privately held, family-owned operation, datesback to Samuel Zacky opening a chicken shop in Los Angeles in1928, according to the company website.

Company officials said in a statement Tuesday that normaloperations and customer service will continue.

They said the entire poultry industry has been strained byhistorically high feed prices which led Zacky Farms to incur"significant operating losses that have depleted its liquidityand working capital position" in its chicken and turkeybusinesses.

It is a strain that has been felt across the nation'slivestock industry, as this summer's drought led to adisappointing corn harvest. Larger producers are scouring theMidwest to snap up whatever feed they can find, or are sinkingtens of millions of dollars into importing corn from Brazil.

But across the livestock world, many farmers now fear theresimply will not be enough feed available to meet industry needs.

In the pork industry, the slaughter of sows - adult femalehogs that are the building blocks of a herd - is happening atrecord rates, swelling pork supplies and sending prices down.

In the cattle industry, some ranchers have liquidated theirherds, eroding beef supplies. That, in turn, has industryanalysts and U.S. Department of Agriculture forecasterspredicting that beef and veal prices will jump as much as 5percent at the meat counter next year.

Zacky Farms will be the eighth poultry firm to be sold,entered into Chapter 11 bankruptcy or shut down altogether since2011, according to data from trade group National ChickenCouncil.

According to court documents, Zacky Farms needs to borrow$71 million, at a 6 percent interest rate, in order to continueoperating under a debtor-in-possession financing facility fromThe Lillian Zacky Family Trust.

Among other things, the company said it needs the funds tocontinue to pay for the feed used by farmers it has undercontract to raise poultry.

The loan, which must be approved by the bankruptcy court,will require "the commencement of an immediate sale process" tosell Zacky Farms as a going concern, according to courtdocuments filed on Tuesday.

The case is Zacky Farms, LLC, U.S. Bankruptcy Court for theEastern District of California, 12-37961.